Asian shares were muted on Monday as high Treasury yields challenged rich Wall Street equity valuations while supporting the U.S. dollar near multi-month peaks. Investors remained cautious, with the Nikkei slipping and Wall Street futures ticking down. The dollar was buoyed by high Treasury yields, which have been a significant factor influencing market movements.
The data diary for the day is dominated by PMI surveys, offering insights into the economic health of major markets. European stocks posted modest declines, tracking weakness in Asian markets as some investors trimmed positions amid uncertainty heading into the year-end. The Stoxx 600 index dropped 0.4%, with volumes relatively thin due to the holiday season.
US futures slipped, adding to Friday’s retreat on Wall Street, marked by a pullback in the “Magnificent Seven” tech megacaps that have powered this year’s rally. Asian stocks snapped five days of gains. “In these moments, it’s best to stay put,” said Nicolas Domont, a fund manager at Optigestion in Paris.
“The US remains the place to be. Growth stocks continue to outperform and earnings forecasts are good, so there are good reasons to remain optimistic.”
Treasuries rose, with 10-year yields dropping from near the highest levels since May. German bonds erased an earlier advance after data showed Spanish inflation accelerated more than anticipated this month, supporting the case for gradual interest-rate cuts from the European Central Bank.
The Bloomberg Dollar Spot Index was steady after rising more than 7% in 2024, driven by the anticipation of “America First” policies from President-elect Donald Trump.
Treasury yields impact Asia stocks
“There’s a little bit of trepidation heading into year-end, owing in part to uncertainty over how the international trade picture may take shape in 2025,” said Tim Waterer, chief market analyst at Kohle Capital Markets Pty.
“Some traders are taking risk off the table heading into year-end.”
Trading in Europe’s equity benchmark was about 60% below the 20-day average. It’s the final session of 2024 for some markets, including Germany, where the DAX benchmark is on course for a 19% annual advance, beating peers in the UK and France. Shares slipped in Tokyo and Shanghai on Wednesday, two of only a handful of world markets open on Christmas day.
Oil prices rose. Japan’s Nikkei 225 index edged 0.1% lower to 38,997.02, while the Shanghai Composite index lost 0.2% to 3,387.41. Thursday will bring a weekly update on U.S. unemployment benefits.
Also early Wednesday, U.S. benchmark crude oil was up 93 cents at $70.17 per barrel. Brent crude, the international standard, picked up 6 cents to $73.23 per barrel. On Tuesday, stocks closed higher on Wall Street in a shortened holiday session.
Gains in Big Tech stocks helped the S&P 500 to a 1.1% gain, while the Dow Jones Industrial Average rose 0.9%. The Nasdaq composite climbed 1.3%. Advancers outnumbered decliners by more than 3-to-1 on the New York Stock Exchange.
